US economy expands 1.9 per cent, but slowdown under Trump takes hold

Analysts warn exports are 'falling off a cliff' amid damaging trade war with China - but American consumers prop up economic growth

Ben Chapman
Wednesday 30 October 2019 13:32 GMT
Donald Trump tweeted: 'The Greatest Economy in American History!'
Donald Trump tweeted: 'The Greatest Economy in American History!' (AFP via Getty)

The US economic growth slowed in the third quarter of the year, giving Donald Trump a headache as he gears up for his 2020 re-election campaign.

Gross Domestic Product (GDP) expanded at an annualised rate of 1.9 per cent growth in the third quarter of the year, the US Commerce Department on Wednesday.

That was down marginally from 2 per cent in the previous three months and marked the third successive quarter of slowing growth for the American economy - though the pace was faster than the 1.6 per cent forecast by analysts.

Analysts warned that orders for US exports were "falling off a cliff" amid a damaging trade war with China and threats from Mr trump of further tariffs on other nations and trading blocs.

Investments in structures like oil rigs, offices and factories plunged 15.3 per cent, after an 11.1 per cent drop in the second quarter.

However, shoppers continued to spend more than expected, helping the overall GDP figures.

Personal consumption rose 2.9 per cent while government spending grew 2 per cent. Increased pending was supported by growing disposable income.

Disposable personal income was up 4.5 per cent in the quarter compared to a year earlier, however the pace slowed from 4.8 per cent in Q2.

The Commerce Department said: "The deceleration in real GDP in the third quarter reflected decelerations in PCE, federal government spending, and state and local government spending, and a larger decrease in nonresidential fixed investment.

"These movements were partly offset by a smaller decrease in private inventory investment, and upturns in exports and in residential fixed investment."

Mr Trump has pinned his hopes of victory in next year's presidential election on a strong economy, which he will be hoping can divert attention away from a growing list of scandals that have dogged his time in office.

The US president took a positive view of the latest figures, tweeting on Wednesday: "The Greatest Economy in American History!".

Economists' analysis was more muted with Ian Shepherdson of Pantheon opining that the data "could have been better".

He said spending by consumers would likely slow down further in the final part of the year, in part because shoppers brought forward some purchases ahead of new US tariffs on Chinese imports in anticipation that prices on affect good would rise.

"Our initial working assumption for Q4 GDP growth is just 1 per cent, but if inventories and exports are as bad as some of the indicators suggest, then a zero or even a sub-zero reading is entirely possible," Mr Shepherdson said.

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